MWSS leases Katipunan property to SM Prime Holdings

SM Prime Holdings Inc. (SMPH), the Philippines’ largest mall operator, will lease government property along Katipunan Road for less than P100 per square meter a month for 25 years, an amount that an official said may be “too low." This, among others, was indicated in a lease contract between SMPH — a company controlled by Henry Sy, the country’s richest person according to Forbes Magazine — and the Metropolitan Waterworks and Sewerage System (MWSS), whose officials have been under fire for receiving excessive bonuses. The contract was signed last May 27, 2010 — or a month before President Benigno Aquino III formally assumed office — by then-MWSS administrator Diosdado Allado and SMPH president Hans Sy. The lease agreement was also endorsed by the MWSS Board of Trustees in a September 4, 2009 resolution signed by Darlina Uy, the MWSS legal services dept. manager/Board Secretary VI designate. Under the contract, the Sy-led company will pay P1,200 a year per square meter for the lease of a 1.417-hectare property at the corner of Ventura and Katipunan roads in Balara, Quezon City, documents obtained by GMANews.TV show. The lease will “automatically be renewed for another 25 years, subject to such other terms and conditions mutually agreed upon by the parties," Section 2 of the contract entitled “Term of Lease" said. SMPH may decide to build a Save More supermarket in the area, a company official who declined to be identified told GMANews.TV. The contract also requires the MWSS to spend for and undertake clearing operations to ensure that the area “is free and clear of any liens, encumbrances, restrictions, structures, tenants, occupants or squatters, and ready and available for commercial development..." However, since rent payments include value added taxes, the amount paid to MWSS “may only reach P88 per square meter a month," Macra Cruz, the agency’s officer-in-charge told GMANews.TV in a phone interview. “At first glance, it seems that the [rent to be paid to MWSS] is already too low," she said. Lots along the area may be worth as much as P40,000 to P70,000 per square meter, informal estimates show. Assuming that lots along the area are worth P60,000 per square meter and a prevailing interest rate of four percent a year, annual rent due to the MWSS should be P2,400, a source familiar with the matter said. Section 7 of the same contract entitled “Grace Period" also allows SM from payment of monthly rentals “until after (a) the lapse of twenty-four (24) months following the execution of this contract or (b) the commencement of commercial operations of Lessee’s mall development on the property, whichever comes earlier." Under the contract, SM also agreed to pay the MWSS advance rental “equivalent to twelve (12) monthly rentals or P17,004,000.00." “The advance rentals shall be applied as monthly rentals during the first twelve months immediately following the grace period," the contract said. A security deposit of P17,004,000.00 “shall be applied as part of the monthly rentals due on the last 12 months of the lease," Section 6 of the contract said. On July 13, 2010, the MWSS has already received a check worth P33,248,892.86, which supposedly cover the security deposit and advance rent. The contract is under review by the Office of the Government Corporate Counsel (OGCC), Cruz added. Text messages sent to SMPH officials requesting clarification about the matter have been left unanswered. - KBK, GMANews.TV